Ask any Malaysian what's wrong with the economy, and they'll probably say it's the (endemic) corruption. It's a fair enough point. But what really bugs me about this economy is the labour market.
Case in point is the graph above. Output is increasing but returns aren't automatically realised by labour.
Malaysia's inflexible labour market system - i.e. wages are not encouraged to track inflation. The once-a-year wage adjustment process and really stringent hiring and firing rules make it hard for wages to conform to price levels.
It's definitely something that affects private investments - as wages generally dictate talent - and it's something that the Government can do about without using much resources (amend some labour law rules and make the subsidy rationalisation process more transparent <-- but more on that later).